INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS; Toyota Is Seeking to Stop Use of Seniority to Set Pay

By STEPHANIE STROM

Published: July 8, 1999

Correction Appended

TOKYO, July 7—
The Toyota Motor Corporation, Japan's largest car maker, is negotiating with its union to eliminate seniority as a major factor in determining the salaries of white-collar workers.

If the company is successful, it may influence the pay practices of companies across Japan, particularly because Hiroshi Okuda, Toyota's chairman, is also chairman of the Japan Federation of Employers' Associations.

Japan has been grappling for ways to mobilize its labor force to help the country climb out of its worst recession since the end of World War II. Worker productivity has stagnated under a system of lifetime employment buttressed by wages that rise in lockstep with tenure.

Many companies, including Toyota, have tied the salaries of top managers to performance, and a few, like Fujitsu, have abolished seniority pay, but the system is still largely in place. At the same time, companies must work harder than ever to retain talented younger employees, who are increasingly rejecting the security of lifetime employment with a single company in favor of employment that offers pay and other rewards based on skills and merit.

''We would like the new system to revitalize young, white-collar employees who have good skills and perform well,'' said Tetsuo Kitagawa, a spokesman for Toyota.

Under the plan, which affects about 20,000 of the company's 70,000 white-collar workers, compensation would be partly based on individual capability, regardless of age or tenure at Toyota.

The union is not likely to oppose Toyota's plans. ''It's better because it rewards performance while protecting job security,'' Akio Nishida, a spokesman for Toyota's union, was quoted by Bloomberg News.

''Toyota will protect employment to the greatest extent possible,'' Mr. Nishida was quoted.

Correction: July 15, 1999, Thursday Because of an editing error, an article in Business Day on July 8 about proposed changes in the Toyota Motor Corporation's system of employee compensation misstated the number of its white-collar workers in Japan. It is about 20,000, not 70,000.